No Celebrities, Unpaid Renewals, Shuttered Facilities: Medical Pot In Florida Faces Severe Headwinds

TALLAHASSEE, Florida — Gov. Ron DeSantis made his tough stance on medical marijuana a cornerstone of his conservative legacy in Florida. And as he prepares to leave office, the outlook for the more than $2 billion industry has investors and businesses alike fretting over the future.

With new state marketing restrictions, pot-growing facilities shutting down and firms unable to pay more than $1 million renewal fees on time, the state’s once booming medical marijuana industry is in notable decline. There are currently 28 state-licensed medical pot companies operating 778 dispensaries across Florida.

Rules proposed by the state Office of Medical Marijuana late last month that would ban the use of celebrities to endorse products are tougher than previous restrictions — and could increase worries about what comes next for a state where hopes were high for medical marijuana success.

The buzzkill continues a DeSantis-era trend; the GOP governor increased licensing renewal fees by more than 2,000 percent before launching a campaign opposing a 2024 recreational legalization ballot initiative that ultimately failed to pass. The OMMU, which is responsible for crafting and implementing the state’s rules around medical marijuana, now is pushing for further restrictions.

Joe Puglise, CEO of the newly licensed Fino Cannabis, said those would make attracting new patients almost impossible.

“How can we as a new company tell adults 21 and over that we’re open for business and we’re here to help patients?” Puglise said. “There’s very little leeway today when you’re a startup and you’re bootstrapping yourself to do this and you don’t have the three to four years to build out.”

The proposed rules are the latest effort by DeSantis to cement his legacy as being tough on the medical marijuana industry. But it’s not yet clear if the two candidates vying to replace him in November, Republican Rep. Byron Donalds and Democrat David Jolly, will bring any relief to the industry.

Already, Surterra, one of the first companies to receive a state license to sell and grow medical marijuana almost 10 years ago, recently announced the closure of two major growing facilities in Florida and laid off more than 100 workers. Surterra is owned by the Atlanta-based Parallel. Parallel did not respond to an email with questions about the recent Surterra layoffs.

Jake Bergmann, who founded Surterra but is no longer involved in the state’s pot industry, was critical of the direction Florida took on marijuana, which is now legal for medical use in 41 states in the U.S. and Washington.

“I’m not surprised it’s difficult,” Bergmann said in a text. “Everything has moved backwards in Florida.”

Many of the pot companies licensed by the state to operate as medical marijuana treatment centers hired Tallahassee lawyer John Lockwood to challenge emergency marketing rules that were finalized by Florida’s Office of Medical Marijuana Use late last year. The OMMU is making its second attempt to tighten marketing restrictions with the state’s formal process, which affords time for public input, meetings, and workshops.

Lockwood said he has already filed a request with the OMMU for a public meeting to air concerns raised by the cannabis industry. And based on the dozens of other rules made since the medical marijuana program began nearly a decade ago, Lockwood said the industry hopes that changes can be made before the restrictions are finalized — or he would have to file a legal challenge.

“I think there are going to be a lot of discussions about the issues that will be watched by the industry and how it plays out,” Lockwood said.

The revised marketing restrictions are tighter than the emergency rules that were repealed. And they would upend corporate policies and practices based on limits already included by Florida’s Legislature in the state’s 2017 medical marijuana law.

Like the repealed emergency rules, the newly proposed changes seek to ban the use of celebrities to endorse products, from ear-shaped gummies backed by heavyweight boxing champ Mike Tyson that were briefly sold at MÜV dispensaries operated by the Chicago-based Verano. The proposals also seek to ban new marijuana strains such as Khalifa Kush, which was launched by Trulieve with rapper Wiz Khalifa. There are also still strict prohibitions on the educational literature a dispensary can hand out to patients, and the use of images depicting people who were enjoying the effects of pot.

Newly proposed rules seek to tighten preexisting limitations and now require pot companies to remove signs placed on roadside marquees advertising businesses in office buildings and strip malls. The emergency rules also tighten restrictions and prohibitions on social media advertising even more, further limiting ads from appearing to promote recreational use and pushing more direct oversight by the state on each specific social media post.

Lockwood said the industry would have accepted the restrictions more easily if they had been enacted when the 2017 medical pot law took effect. But now companies are faced with making several costly changes to meet the terms of the new rules — some of which were already made to meet the specifications established by counties and municipalities that sought to limit storefront visibility.

“After 10 years — 10 years of marketing their products to patients in Florida — now the regulator wants to completely change the rules and substantially constrain licensed MMTCs' ability to market their products,” Lockwood said.

Lockwood expects the state's new rules won't be finalized for months — beyond when DeSantis is in office. But he expects the next governor won't change course.

Donalds was one of eight state House members who chose not to vote on the medical marijuana law when the Legislature approved it during a summer special session in 2017. Jolly, who was a Republican before switching parties, previously said he opposes recreational pot use, but he reversed that position after he announced his candidacy for governor. He said unlike DeSantis, he would not campaign against a future ballot initiative seeking to permit adult recreational use. Donalds, on the other hand, said he would continue DeSantis’ fight to keep another industry-backed initiative off the statewide ballot.

Neither campaign responded to questions about whether they would continue DeSantis’ push for tighter medical marijuana restrictions.

The state’s vertically-integrated licenses to sell and grow medical marijuana that sold for more than $50 million eight years ago are now worth less than $3 million, with investors doubtful of industry growth after the 2024 recreational use amendment failed.

The OMMU also recently denied requests from licensees who had asked for more time to pay the $1.3 million renewal fee required by the state every two years. DeSantis increased the renewal fee from $60,000 in 2022, saying at the time that pot companies could afford paying an “arm and a leg” for the increase.

The startup costs for one of the state’s licenses, including meeting development milestones strictly enforced by the OMMU, have left newly formed pot companies with up to $30 million in upfront costs to build dispensaries, factories and grow facilities, labor, supplies, and cover costs for the first three years in business.

Despite all the regulations, Fino Cannabis, which opened its first dispensary earlier this year in Clermont, has plans to open two more dispensaries in the coming months. But Puglise said the new marketing restrictions would cripple his company’s ability to attract more patients in an environment where the industry has already accepted limitations that were mostly meant to keep products away from children.

Puglise said he is optimistic that OMMU regulators will at least consider the concerns brought by the industry but he has also accepted the tighter restrictions may just be another step by DeSantis to limit industry growth.

“There’s that old feeling again,” Puglise said. “It’s draconian that’s now draconian squared.”